Gonzales v. CarMax Auto Superstores, LLC

• Citation: 840 F.3d 644
• Decision Date: 20 October 2016
• Docket Number: No. 14-56305,No. 14-56842,14-56842
• Parties: Travis Z. Gonzales, an individual, Plaintiff–Appellant v. CarMax Auto Superstores, LLC, a Virginia Limited Liability Company; Santander Consumer USA, Inc., an Illinois Corporation; Safeco Insurance Company of America, a New Hampshire Corporation, Defendants–Appellees. Travis Z. Gonzales, an individual, Plaintiff–Appellee, v. CarMax Auto Superstores, LLC, a Virginia Limited Liability Company; Santander Consumer USA, Inc., an Illinois Corporation; Safeco Insurance Company of America, a New Hampshire Corporation, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

840 F.3d 644

Travis Z. Gonzales, an individual, Plaintiff–Appellant

v.CarMax Auto Superstores, LLC, a Virginia Limited Liability Company; Santander Consumer USA, Inc., an Illinois Corporation; Safeco Insurance Company of America, a New Hampshire Corporation, Defendants–Appellees.

Travis Z. Gonzales, an individual, Plaintiff–Appellee,

v.CarMax Auto Superstores, LLC, a Virginia Limited Liability Company; Santander Consumer USA, Inc., an Illinois Corporation; Safeco Insurance Company of America, a New Hampshire Corporation, Defendants–Appellants.

No. 14-56842

No. 14-56305

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 2, 2016, Pasadena, California

Filed October 20, 2016

Hallen D. Rosner (argued), Rosner, Barry & Babbitt, LLP, San Diego, California, for Plaintiff–Appellant/Cross–Appellee.

Kurt A. Schlichter (argued), Steven C. Shonack, Jamie L. Keeton, Schlichter & Shonack, LLP, El Segundo, California, for Defendants–Appellees/Cross–Appellants.

Before: Stephen Reinhardt, Alex Kozinski, and Kim McLane Wardlaw, Circuit Judges.

OPINION

REINHARDT

, Circuit Judge:

Travis Z. Gonzales sued CarMax Auto Superstores, LLC (“CarMax”), a used car retailer, after experiencing problems with a vehicle he purchased at one of its lots. Gonzales alleged violations of four California consumer protection laws: (1) the Consumer Legal Remedies Act (“CLRA”); (2) the Song–Beverly Consumer Warranty Act (“Song–Beverly”); (3) common law fraud and deceit; and (4) the Unfair Competition Law (“UCL”). Gonzales's claims under the CLRA and UCL were both based on CarMax's alleged violation of California Vehicle Code section 11713.18(a)(6)

, which requires a car dealer to provide consumers with a “completed inspection report” prior to the sale of any “certified” vehicle. The district court dismissed Gonzales's fraud and Song–Beverly claims and granted CarMax summary judgment on his CLRA and UCL claims.

The key issue before us is whether a report that fails to indicate the results of an inspection in a manner that conveys the condition of individual car components to a buyer is a “completed inspection report” under California law. Because we conclude that it is not, we reverse the district court's decision to grant summary judgment to CarMax on Gonzales's CLRA and UCL claims.¹

Factual and Procedural Background

Gonzales purchased a 2007 Infiniti G35 from CarMax's Costa Mesa sales lot. Gonzales alleges that he was drawn to CarMax after hearing radio and online advertisements regarding the benefits of purchasing a “certified” vehicle that had passed CarMax's rigorous “125–point” certification inspection. Gonzales further alleges that he would have paid less, or possibly not even purchased the car, had it not been a “certified” vehicle.

According to Gonzales, it is CarMax's policy to simply provide purchasers of used vehicles with a pre-printed “CarMax Quality Inspected Certificate” (“CQI Certificate”) listing vehicle components that were inspected. Gonzales received two versions of the CQI Certificate: a one-sided CQI Certificate provided to him prior to sale, and a two-sided CQI Certificate, which was placed in the glove compartment before he took possession of the car. In addition to the two CQI Certificates that CarMax provides to purchasers of used vehicles, CarMax also uses a third document known as the “CQI/VQI Checklist.” This is a checklist which contains 236 points of inspection and is filled out by a technician during the inspection process. The CQI/VQI Checklist, unlike the CQI Certificates, indicates the condition of each individual component inspected. Rather than provide the CQI/VQI Checklist to consumers, CarMax destroys the document after the inspection results are entered into its electronic system, and no copy of the Checklist is retained.

Shortly after purchasing the Infiniti, Gonzales experienced some difficulty with the car. He contended that the brake pads needed replacing, there was a clicking noise coming from the engine, and the windows malfunctioned. Additionally, the check-engine light illuminated routinely, there were problems with the transmission, the clicking noise from the engine persisted, and other warning lights on the dashboard illuminated “in clusters.”

Gonzales filed suit in California state court alleging that CarMax violated California consumer protection laws by selling him a lemon and falsely claiming that the car was certified. Gonzales's central argument is that CarMax violated California law by failing to provide him with a “completed inspection report” prior to the sale of the “certified” vehicle.

CarMax timely filed a notice of removal pursuant to 28 U.S.C. § 1441(b)

claiming diversity jurisdiction. A week after removal, CarMax filed a motion to dismiss the first amended complaint, as well as a motion to strike Gonzales's punitive damages claim. The following month, while the motion to dismiss the first amended complaint was pending, the district judge issued an order to show cause regarding subject matter jurisdiction, noting that he had “serious doubts” whether the case met the amount-in-controversy requirement. After the parties responded to the order to show cause, the district judge found that CarMax had shown by a preponderance of the evidence that the amount in controversy was over $75,000 and thus the action was properly removable.

The district court then granted CarMax's motion to dismiss on all claims except for Gonzales's CLRA and UCL claims. Following discovery, CarMax filed a motion for summary judgment on Gonzales's CLRA and UCL claims. The district court granted the motion, holding that there was no material legal difference between the one-sided form and the two-sided form, and that both forms were legally sufficient. Gonzales appeals the district court's dismissal and summary judgment orders. We consider only the latter here. We dispose of the other claims in a memorandum disposition filed concurrently.

Discussion

I. Standards of Review

We review de novo a district court's determination that diversity jurisdiction exists, but review any factual determinations necessary to establish diversity jurisdiction for clear error. Kroske v. U.S. Bank Corp. , 432 F.3d 976, 979–80 (9th Cir. 2005)

.

An order granting summary judgment is reviewed de novo . “We must determine, viewing the evidence in the light most favorable to the non-moving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant law.” Ventura Packers, Inc. v. F/V JEANINE KATHLEEN , 305 F.3d 913, 916 (9th Cir. 2002)

.

II. Subject Matter Jurisdiction

Gonzales contends that the district judge erred in exercising diversity-based subject matter jurisdiction over this case. We conclude that he did not.

A defendant generally may remove any action filed in state court if a federal district court would have had original jurisdiction. 28 U.S.C. § 1441(a)

. To establish original jurisdiction based on diversity of parties, the amount in controversy must “exceed[ ] the sum or value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332(a). We have defined the amount in controversy as the “amount at stake in the underlying litigation,” Theis Research, Inc. v. Brown & Bain , 400 F.3d 659, 662 (9th Cir. 2005) ; this includes any result of the litigation, excluding interests and costs, that “entail[s] a payment” by the defendant. Guglielmino v. McKee Foods Corp. , 506 F.3d 696, 701 (9th Cir. 2007). This amount includes, inter alia , damages (compensatory, punitive, or otherwise) and the cost of complying with an injunction, as well as attorneys' fees awarded under fee shifting statutes. Chabner v. United of Omaha Life Ins. Co. , 225 F.3d 1042, 1046 n.3 (9th Cir. 2000)

.

In this case, when the potential cost of complying with injunctive relief is considered along with Gonzales's claims for compensatory damages and punitive damages, the district court did not err in finding that the jurisdictional amount-in-controversy requirement was satisfied.²

III. Consumer Legal Remedies Act and Unfair Competition Law Claims

Section 11713.18 of the California Vehicle Code

prohibits a car dealer from either advertising for sale or selling a used vehicle as “certified” under nine circumstances, including if:

Prior to sale, the dealer fails to provide the buyer with a completed inspection report indicating all the components inspected.

Cal. Veh. Code § 11713.18(a)(6)

. The statute further provides that a violation of any of these provisions is actionable under the CLRA, the UCL, false advertising statutes, or any other applicable state or federal law. Cal. Veh. Code § 11713.18(b).

Here, the alleged failure to provide a completed inspection report underlies Gonzales's CLRA and UCL claims. Gonzales contends that CarMax failed to provide a “completed inspection report” before selling him a “certified” vehicle. We must decide whether the CQI certificates that CarMax provides to consumers satisfy the requirements of § 11713.18(a)(6)

. We hold they do not, because the CQI certificates fail to provide the actual results of the inspection for the individual components, thus rendering the inspection reports incomplete.

Because this case was removed to federal court under diversity jurisdiction, California law applies. St. Paul Fire & Marine Ins. Co. v. Weiner , 606 F.2d 864, 867 (9th Cir. 1979)

. When a state's highest court has not yet ruled on an issue, we must reasonably determine the result that the highest state court would reach if it were deciding the case. Med. Lab. Mgmt. Consultants v. Am. Broad. Companies, Inc. , 306 F.3d 806, 812 (9th Cir. 2002). In doing so, we may look to decisions from state appellate courts for guidance. Dimidowich v. Bell & Howell , 803 F.2d 1473, 1482 (9th Cir.1986), modified on other grounds , 810 F.2d 1517 (9th Cir. 1987). In the present case, however, there are currently no published opinions from any California appellate courts interpreting section 117.1318(a)(6).³ Even...